I present the idea that imperfect information about the (vertical) quality characteristics of goods reduces the sellers' incentives for horizontal product As a result, the equilibrium outcome may be characterized by minimum differentiation. In a spatial framework this implies that firms tend to choose head-on competition by agglomerating at the same location. It may happen that consumers benefit from imperfect information about product quality.
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Helmut Bester (1998) studied this question.
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